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Capturing the environment, a metafrontier approach to the drinking water sector


  • Kristof De Witte
  • Rui C. Marques


Environmental factors add complexity to the comparison between specific activities or entire entities. Decision making units with an inferior performance are tempted to invoke that their organization is different from the others in the data set. By reinterpreting and extending the metafrontier literature, we propose an all-embracing concept to fully capture the operational environment. We suggest the ‘Group Specific Technical Efficiency’ as a new measure to assess the overall efficiency of a utility while allowing for environmental differences. A real-world example of drinking water utilies out of 5 different countries illustrates the concept.

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  • Kristof De Witte & Rui C. Marques, 2008. "Capturing the environment, a metafrontier approach to the drinking water sector," Working Papers Department of Economics ces0804, KU Leuven, Faculty of Economics and Business, Department of Economics.
  • Handle: RePEc:ete:ceswps:ces0804

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    5. Richard Arnott & Marvin Kraus, 1995. "Self-Financing of Congestible Facilities in a Growing Economy," Boston College Working Papers in Economics 304., Boston College Department of Economics.
    6. Arnott, Richard & de Palma, Andre & Lindsey, Robin, 1993. "A Structural Model of Peak-Period Congestion: A Traffic Bottleneck with Elastic Demand," American Economic Review, American Economic Association, vol. 83(1), pages 161-179, March.
    7. Zhang, Anming & Zhang, Yimin, 2003. "Airport charges and capacity expansion: effects of concessions and privatization," Journal of Urban Economics, Elsevier, vol. 53(1), pages 54-75, January.
    8. David Levinson, 2001. "Why States Toll: An Empirical Model of Finance Choice," Journal of Transport Economics and Policy, University of Bath, vol. 35(2), pages 223-237, May.
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    Cited by:

    1. Mercedes Beltrán-Esteve & José Gómez-Limón & Andrés Picazo-Tadeo & Ernest Reig-Martínez, 2014. "A metafrontier directional distance function approach to assessing eco-efficiency," Journal of Productivity Analysis, Springer, vol. 41(1), pages 69-83, February.
    2. Graziano Abrate & Fabrizio Erbetta & Giovanni Fraquelli, 2011. "Public utility planning and cost efficiency in a decentralized regulation context: the case of the Italian integrated water service," Journal of Productivity Analysis, Springer, vol. 35(3), pages 227-242, June.
    3. Steven Renzetti & Diane P. Dupont, 2009. "Measuring the Technical Efficiency of Municipal Water Suppliers: The Role of Environmental Factors," Land Economics, University of Wisconsin Press, vol. 85(4), pages 627-636.
    4. Kristof Witte & David Saal, 2010. "Is a little sunshine all we need? On the impact of sunshine regulation on profits, productivity and prices in the Dutch drinking water sector," Journal of Regulatory Economics, Springer, vol. 37(3), pages 219-242, June.
    5. Kristof De Witte & Wim Groot & Henri?tte Maassen van den Brink, 2012. "The Efficiency of Education in Generating Literacy: A Stochastic Frontier Approach," Review of Economics & Finance, Better Advances Press, Canada, vol. 2, pages 25-37, February.
    6. Giulia Romano & Nicola Salvati & Andrea Guerrini, 2014. "Factors Affecting Water Utility Companies’ Decision to Promote the Reduction of Household Water Consumption," Water Resources Management: An International Journal, Published for the European Water Resources Association (EWRA), Springer;European Water Resources Association (EWRA), vol. 28(15), pages 5491-5505, December.
    7. Shinji Yane & Sanford Berg, 2013. "Sensitivity analysis of efficiency rankings to distributional assumptions: applications to Japanese water utilities," Applied Economics, Taylor & Francis Journals, vol. 45(17), pages 2337-2348, June.

    More about this item


    Free Disposal Hull; Efficiency Measurement; Environmental Variables; Metafrontier; Water Industry;

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • L95 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Gas Utilities; Pipelines; Water Utilities

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